740.00119 EW/2–649: Telegram

The Secretary of State to the Embassy in the United Kingdom


432. For the Ambassador from Saltzman. We have again reviewed within Dept question you raised in Fri telecon1 in light our phone conversation Sat.2 In our view differences between us and Brit and Fr on prohibited and restricted industries are substantial and raise extremely important questions of overall policy. One of major differences concerns time during which restrictions now under negotiation are to be effective. Our position is they should be effective only until peace treaty, but subject to earlier review if treaty is unduly delayed (probably sooner than 5 years) and subject to periodic review of certain individual restrictions. Fr position, with which we believe Br are fundamentally in agreement, is that 3 powers should now commit themselves to support prohibitions and restrictions in peace treaty (see Paris 1427 to London Dec 63).

Differences respecting industries to be limited are also still quite substantial. They flow from basic differences in approach. Our effort has been to limit prohibitions and restrictions to a few industries having direct relationship to military power and to avoid arrangement which would hamper Ger industrial production and be difficult administer. Br and Fr are seeking variety of restrictions throughout Ger economy. We have been willing envisage some concessions to them fixing limitations to “present capacity” in a number of industries until peace treaty subject to review. We believe these restrictions would not have unfortunate consequences provided these are not incorporated in peace treaty. We understand Clay has not offered these concessions [Page 551] and we will probably wish review our position on them when negotiations come to the governmental level. For these reasons the area of agreement shown in papers you have may be more apparent than real.

The continuing restrictions to be laid on Ger economy seem to us clearly far more important than fate of 50 odd plants in dispute in the dismantling issue, a point which Clay has also forcibly made to us. We would not consider it wise use concessions on this important issue as device for getting agreement on dismantling issue. If we should do so our feeling is we could get quick agreement only by making significant concessions in the prohibited and restricted industry field which we would consider unwise and which we would probably have new difficulties in justifying to Cong.

In view of current interdepartmental consideration under aegis of National Security Council now being given to overall approach to Br and Fr on Ger problem, we would encounter considerable difficulty in getting agreement within the Govt to high level negotiation on prohibited industry at this time. Position to be taken by this Govt would have to be coordinated with Army and ECA. All this would take good deal of time even if we agreed immediately proceed with such negotiations as you suggest.

You recall decision here was avoid linkage dismantling issue with prohibited and restricted industry negotiation, if by so doing early solution of former would be impeded. For reasons given above Dept concludes considerable period required for negotiation prohibited and restricted industries on basis satisfactory this government.

For foregoing reasons we do not think it wise at this time to agree to relating reparations negotiation with negotiation on prohibited and restricted industries. Therefore believe you should proceed to discuss with Bevin and Schuman our request based on Humphrey Report, urging prompt agreement on broad grounds in order clear up now the reparations situation which has been unsettled for so long and in order remove this obstacle in connection with ERP appropriations.

  1. Not printed; in it Douglas reported on a conversation with Bevin in which the British Foreign Secretary indicated his desire to settle the question of reparations. Bevin said the British would have great difficulty in accepting the Humphrey Committee recommendations and wanted to combine discussions on reparations and prohibited and restricted industries. (CFM Files: Lot M–88: Box 180: GRPG Documents)
  2. No record of this conversation has been found in Department of State files.
  3. Not printed.